Getting hold of European research funding is not a walk in the park. While the competition may not be particularly fierce, the bureaucratic hoops have been known to put people off. But overall, the benefits seem to outweigh the drawbacks. UK universities get back more than their government puts into the EU kitty, making us a net winner in the EU stakes.

This may be about to change. A study published last week by JM Consulting, for the umbrella group Universities UK and the Higher Education Funding Council for England, says UK universities may want to think twice about applying for lots of EU grants.

In September 2005, UK universities moved to a new accounting system. The Trac system provides them with data on the full cost of the research they carry out, including overheads like heating and water bills. It was brought in after years of underfunding for these hidden costs of research, which resulted in serious under-investment in laboratory buildings and equipment.

The great thing about the new system is that universities can balance their funding portfolios. For example, if they are offered a grant from a charity that does not cover indirect costs, they can see whether they have enough money in their coffers to meet the extra costs, allowing them to take up the grant without operating at a loss.

Many UK funders have agreed to pay a higher percentage of indirect costs since last September. But the EU hasn't.

Cost recovery from Europe, last week's report warns, will not be as efficient as from UK funders. As a result, EU funding risks being regarded as second class by our universities, even as a potential liability. If that were to happen, the UK could quite rapidly become a net loser in the EU stakes. And that would mean the millions the UK government pours into the EU research budget each year would travel to Brussels on a one-way ticket. With a new European funding programme taking off in 2007 with significant UK funding commitment, the government will not want that to happen. Its challenge will be how to sell EU funds to universities. But glorifying cross-border cooperation simply won't do. Universities have heard all that before, and can spot the spin.

No, if the EU funds won't stretch on their own, Whitehall will have to speak louder than words - with cold, hard cash.